Tuesday Closing Dairy Market Update - Class IV Milk Futures Suffer Significant Losses

OVERVIEW:

Class III futures closed mixed despite the weakness of cheese prices. Class IV futures suffered significant losses as the butter and nonfat dry milk prices declined. Sellers had butter to move and were willing to move it at lower prices.

MILK:

Milk futures step back after making brief gains. This keeps Class III futures in a sideways range and keeps seasonal premium out of the market for contracts next year. The weakness of butter put substantial pressure on Class IV futures, pushing the November contract below $15.00 again. The pattern indicates limited upside price potential through the end of the year. There is concern that spot prices could see further weakness moving through the rest of the year. Prices may hold through October, but further weakness could be seen later as buying for the holiday season is finished. On the other hand, milk production is expected to increase and remain above a year ago. The World Agricultural Supply and Demand report is scheduled to be released on Thursday, but it is unlikely due to the government shutdown. We can only presume that grain production remains large and prices low. This ensures plentiful feed supplies at reasonable prices.

AVERAGE CLASS III PRICES:

3 Month:	$17.03
6 Month:	$16.99
9 Month:	$17.02
12 Month:	$17.12

CHEESE:

Cheese prices are likely to remain in a range for the foreseeable future. Cheese production is increasing as milk output rises. Cheese production may increase similar to demand, resulting in inventory decreasing but at a slower pace than usual. The weakness of prices today leaves the market in a bearish posture.

BUTTER:

The weakness of butter over the past two days increases the potential for the price to revisit the lows of September 24 at $1.62. There had been hope that the market had found a bottom, but that cannot be certain due to the recent price movement. Buyers were able to purchase a substantial amount of butter today at lower prices, increasing their supply for the holidays.

OUTSIDE MARKETS SUMMARY:

December corn closed down 2.00 cents per bushel at $4.1975, November soybeans closed up 4.25 cents at $10.2200 and December soybean meal closed down $.20 per ton at $276.90. December Chicago wheat closed down 6.00 cents at $5.0675. December live cattle closed up $1.05 at $237.73. November crude oil is up $0.04 per barrel at $61.73. The Dow Jones Industrial Average is down 92 points at 46,603, with the NASDAQ down 153 points at 22,788.